Akron's new revitalization loan fund is up and running

Akron has a new loan fund in place to help finance projects in urban areas and especially in challenged neighborhoods, where developments likely could not qualify for a bank loan or other funding.

With backing organized and partially provided by the Akron-based Development Fund for the Western Reserve (DFWR), the Akron Community Revitalization Loan Fund has about $6.75 million to lend out, at least initially, DFWR president Christopher Burnham said.

The money will be used to fund projects smaller than what DFWR usually takes on. The larger Western Reserve fund sets up individual limited liability corporations for most of its projects, including major hotels that it has helped finance in recent years near Kent State University and in Akron's East End development. Those and other projects often require tens of millions of dollars of capital to complete.

The new loan fund, which also is operating under its own separate LLC set up by DFWR, will focus on smaller projects. And unlike the regional Western Reserve fund, the new revitalization fund will be exclusively for use in Akron and focus on underserved census tracks where poverty and unemployment are high.

"We have said we'd do (loans of) between $500,000 and $2 million with the loan fund. As more unencumbered money comes in, we can probably do smaller loans, too," Burnham said.

Because loan underwriting is not the chief expertise of Burnham or the Western Reserve fund, he said Cleveland-based Village Capital will review and help underwrite the new fund's loans. Village Capital, a community development organization that specializes in financing projects and is part of the larger group, Cleveland Neighborhood Progress, has focused largely on real estate-related projects in Cleveland and is a good partner to work in Akron, Burnham said.

"These deals are not our bread-and-butter expertise, so we contracted with Village Capital, which has a long history of doing good work up in Cleveland. ... We're actually using their loan committee, and I think that made everyone a little more confident in this," Burnham said.

By "everyone," Burnham is referring to the banks, foundations and area corporations, such as Goodyear Tire & Rubber Co., that either provided grant or loan money to get the new fund up and running. Federal New Market Tax Credits facilitated much of that investment by the for-profit corporations, Burnham said.

All told, DFWR and its local partners raised just under $3.6 million in local grants and investments to leverage equity provided by federal tax incentives, Burnham said.

Burnham estimates the fund will be able to loan out money at a rate under 3%, which is fairly cheap considering, as Burnham notes, "these are project that are difficult to underwrite." Currently, most commercial loans from traditional banks carry an interest rate of between 5% and 6% with a credit-worthy project and borrower.

The fund will focus on real-estate backed projects, which many lenders prefer because real estate is hard.

That said, the loan fund already may have the applications in hand to lend out all of its initial capital. Burnham said the fund is not currently seeking applications because it's already reviewing six projects for potential loans.

Those specific projects will be named later, if and when they are approved for loans. Other deals are waiting to get into the pipeline as well, he said.

Burnham said he hopes to expand the loan fund in the future, something he said would allow it to make more loans — and likely smaller loans.

It's already a welcome addition to Akron's financial landscape and has been praised by both business groups and area nonprofits seeking to help revitalize Akron.

"Leveraging these resources creates collaborative synergies for promoting wealth and opportunity in areas of Akron that are especially in need of this type of activity," said Rick Rebadow, executive vice president of the Greater Akron Chamber.

Christine Mayer, president of Akron's GAR Foundation, was one of the loan fund's first backers and remains a stalwart supporter.

Although GAR provided the fund with a grant of $500,000, Mayer said she especially likes that the fund is bringing federal money, as well as investments by companies such as PNC and US Bank into the community.

"The main attribute that I really like about this program is that it imports dollars from outside of the community into our community and really puts them to catalytic use," Mayer said. "We'll try to use these for project that are really close to happening but just can't get done otherwise."

Mayer also applauded Burnham and DFWR, because she said the fund likely would not have gotten off the ground without them to help guide investors through the intricacies of investing in the fund and the New Market Tax Credits that help back it.

The fund also needed money that DFWR provided as the larger organization increased its own loan commitment to the fund, from $1 million to $1.5 million, which Burnham said allowed the Akron fund to formally launch and to begin lending.

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